With “some consternation,” a federal judge has dismissed a lawsuit filed by a former McDermott shareholder who claims that he was defrauded out of his ownership stake in the company through a conspiracy that included former Houston Bankruptcy Judge David Jones, his secret girlfriend Elizabeth Freeman, her former law firm Jackson Walker and mega-corporate law firm Kirkland & Ellis.
Calling the defendants’ alleged conduct “egregious,” Western District of Texas Chief District Judge Alia Moses ruled late Friday that she resisted “the temptation to bend the existing frameworks [of current precedent] to bring a vexing case to a palatable resolution” and granted the defendants’ motions to dismiss on the basis that the plaintiff did not have standing.
The decision came only hours after Southern District of Texas Chief Bankruptcy Judge Eduardo Rodriguez ordered his former colleague to take 7.5 hours of ethics training after finding Judge Jones acted in bad faith when he consented to an interview with Jackson Walker lawyers.
Michael Van Deelen, who owned 30,000 shares of McDermott stock when the company filed for bankruptcy in 2020, was the first to publicly accuse Judge Jones and Freeman of having a secret relationship after receiving an anonymous letter.
Van Deelen accused the defendants of a “sprawling tapestry of ethical lapses” that led to his stock being worthless while Jackson Walker and Kirkland — debtor’s counsel for McDermott — banked millions of dollars from the alleged conspiracy. He sued claiming mental anguish and financial loss.
In a 38-page decision, Chief Judge Moses said not dismissing Van Deelen’s case at this stage would “greenlight a new category of lawsuits” seeking “claims for money damages based on how judges handle potential conflicts of interest.”
The chief judge gave lawyers for Van Deelen 30 days to amend his complaint. Judge Jones resigned fron the bench in October after the U.S. Court of Appeals for the Fifth Circuit announced it was conducting an investigation based on Van Deelen’s allegations. Judge Jones, in an interview with The Texas Lawbook, admitted to his relationship with Freeman.
Efforts to reach the Bandas Law Firm, which is representing Van Deelen, were unsuccessful.
“None of the foregoing discussion redeems Jones’ misconduct,” Chief Judge Moses wrote. “The Jones-Freeman relationship presented a glaring appearance of impropriety.”
Chief Judge Moses echoed Chief Judge Priscilla Richman of the Fifth Circuit who wrote that Judge Jones “ran roughshod over several canons of the Code of Conduct for U.S. Judges.”
“Whether through hubris, greed, or profound dereliction of duty, Jones flouted these statutory and ethical requirements by presiding over dozens of cases from which he was obviously disqualified,” Chief Judge Moses wrote. “The legal deficiency of the plaintiff’s claims does not erase these failures.”
“The Court takes no pleasure in this result. The Plaintiff’s allegations, if true, cast doubt on the integrity of numerous high-profile bankruptcy cases. Litigants should not have to wonder whether the judge overseeing their case stands to gain from ruling against them: but in Jones’s courtroom, they did.”
The chief judge also rejected a petition by lawyers for Kirkland to issue sanctions against Van Deelen and his lawyers for filing frivolous claims.
“True, plaintiff has a history of filing meritless and frivolous claims about supposed public corruption,” the chief judge wrote. “But this time, he was right.”
“It was the plaintiff’s audacity that brought this scandal to light,” she wrote. “Had the anonymous letter arrived in anyone else’s mailbox, perhaps Jones would still be on the bench, awarding millions of dollars to Kirkland and Jackson Walker.”
Judge Jones is represented in the litigation by McKool Smith.
Rusty Hardin is defending Jackson Walker.
Tom Kirkendall is representing Freeman.
Kirkland has Beck Redden and Hueston Hennigan as its counsel.
The case is Michael Van Deelen v. David R. Jones, No. 4:23-CV-03729.